Farmers defend direct payments after Obama remark

KANSAS CITY, Missouri (Reuters) - U.S. farmers expressed a mix of skepticism and concern on Wednesday following a call by President Barack Obama for an end to certain subsidies for agriculture.

Obama, in his first speech to Congress, on Tuesday said the United States should end "direct payments to large agribusinesses that don't need them."

Details were lacking, leaving many farmers uncertain how such a move, if implemented, might affect them. There was also the sense among many that Obama's words were more political rhetoric than any near-term policy reality.

"It is certainly something that makes good rhetoric to say we're going to cut direct payments to agribusiness. But I'm not sure what it really means at this point," said Rick Tolman, chief executive of the National Corn Growers Association.

Farm group spokesmen said Obama apparently meant a farm subsidy known as direct payments that was created in 2002 and made regardless of crop prices or farm profits. But the term also can encompass all types of federal support made in cash, from crop supports to conservation to marketing research.

Still, in key farm states in the U.S. Midwest where wheat, corn and soybeans are king crops and cattle run the range, and across the nation's farm country, the prospects of Washington cutting into direct payments for farmers was roundly attacked.

"The goal of farm programs is not to make farmers rich," said John Thaemert, a Kansas wheat farmer and a past president of the National Association of Wheat Growers. "The goal of farm programs is to make sure our country has access to an abundant, affordable, convenient and safe supply of food."

Thaemert farms about 1,500 acres of wheat and row crops and receives about $15,000 in a direct payments, he said.

That money helps offset insurance payments of $20,000 but will do little this year to make up for a combination of high fertilizer and fuel costs and falling wheat prices, he said.

Cutting subsidies is also touchy topic with non-grain crops from sugarbeets to rice, cotton and many others.

"It is a hot issue particularly in crops such as cotton and rice where operations tend to be extremely large, where the value of those crops are quite large and the payments tend to be quite large," said Otto Doering, professor of agricultural economics at Purdue University.

Obama's comments delivered to Congress were offered in the context of larger budget savings and were consistent with statements he made to farm groups during his campaign about reining in farm subsidies and eliminating waste and fraud associated with the subsidies.

Obama supported the 2008 Farm Bill, a five-year program which continued direct federal payments to farmers that totaled about $5 billion in 2007. But he has said he wants a subsidy ceiling of $250,000 a year per farm.

Farmers say the direct payments help them maintain credit with local banks as a form of dependable cash flow, and help farmers who lose crops to drought or disease.

They are considered trade friendly, nondistorting to price or production, and so small in sum in comparison to other budget items, that farmers and their advocates say there is little upside to eliminating them.

"I wouldn't be surprised that some of these direct payments over time are diminished or eliminated but I don't think it's going to happen all at once," said Dan Basse, president of AgResource, a Chicago-based consultancy.

Dennis Shields, a farmer from Lindsborg, Kansas, who works a second job as a truck driver to make ends meet, said he valued help from the federal government but was bracing for hard times given the credit crisis and U.S. recession.

"We got a lot of other problems nationally right now," said Shields. "The good operator is just going to have to sharpen his pencil and figure it out like any other business."

(Additional reporting by Chris Stebbins and Karl Plume in Chicago. Editing by Peter Bohan and Marguerita Choy)